Flood probe clouds growth outlook

THE PHILIPPINES’ economic expansion is set to fall short of official targets through 2026 as a widening graft investigation into flood control projects weighs on public spending and investor confidence, according to Deutsche Bank Research.

- By Katherine K. Chan

“The graft probe has weighed on sentiment onshore and will likely drag growth below potential over the coming quarters as it continues to evolve,” Deutsche Bank economist Junjie Huang said in a Nov. 22 report.

Heightened caution among public officials could lead to uneven disbursements even as President Ferdinand R. Marcos, Jr. confirmed that unused infrastructure funds would be reallocated to priority sectors such as health and education, he added.

Deutsche Bank Research lowered its gross domestic product (GDP) growth forecast for next year to 5.1% from 5.7%, below the government's 6-7% goal. “The Philippines is expected to see a modest growth recovery to 5.1%, as private demand makes up for softer public spending.”

It cut its 2025 projection to 4.7% from 5.4%, signaling a marked slowdown from last year's 5.7% expansion.

In the third quarter, the Philippine economy grew 4%, the slowest in more than four years, as the widening corruption probe curtailed government spending and dampened household consumption.

The uncertainty surrounding fiscal policy has intensified as the government navigates the scandal. Deutsche Bank Research expects the budget deficit to settle at 5.4% of GDP in 2025 and 2026.